WEBVTT - FOMC Preview with Frank Sorrentino 0:00:02.520 --> 0:00:09.160 Bloomberg Audio Studios, Podcasts, radio news. You're listening to Bloomberg 0:00:09.280 --> 0:00:13.800 Business Week with Carol Masser and Tim Stenoveek on Bloomberg Radio. 0:00:14.160 --> 0:00:15.960 We are all in on the FED today, although it 0:00:15.960 --> 0:00:18.640 may not seem like it because of the conflict overseas. 0:00:18.720 --> 0:00:19.560 Kind of amazing right now. 0:00:19.560 --> 0:00:22.440 Any other day, Yeah, Yeah, where we'd be on the Tuesday, 0:00:22.520 --> 0:00:25.320 the first day of a two day policy meeting, we'd 0:00:25.520 --> 0:00:27.280 spend quite a bit of time talking about the food 0:00:27.360 --> 0:00:27.800 or were we. 0:00:27.680 --> 0:00:30.120 Talk about the market? Kind of marking time because it's 0:00:30.160 --> 0:00:32.600 just waiting FED decision. But that's not necessarily been the 0:00:32.600 --> 0:00:33.160 trade today. 0:00:33.360 --> 0:00:35.839 One person we go to regularly for his view on 0:00:35.880 --> 0:00:39.160 the economy and rates around FED decisions is Frank Sorrentino. 0:00:39.200 --> 0:00:42.160 He's chairman and CEO at the publicly held New Jersey 0:00:42.240 --> 0:00:45.280 based community bank connect One Bank Corp. W's the parent 0:00:45.720 --> 0:00:49.720 of Connect One Bank. We're talking small businesses, construction companies 0:00:49.880 --> 0:00:53.840 among its customers. The bank recently merged with First Long 0:00:53.840 --> 0:00:56.800 Island Corp. Which brings its total assets, Carol to about 0:00:57.040 --> 0:00:58.440 fourteen billion dollars. 0:00:58.440 --> 0:01:00.120 All right, Frank is back with us and he is 0:01:00.160 --> 0:01:02.320 in Melville, Long Island. Frank good to have you here. 0:01:02.400 --> 0:01:05.360 We always appreciate getting some time to check in with 0:01:05.400 --> 0:01:08.400 you and see what you are seeing. It's all fast 0:01:08.400 --> 0:01:11.720 and very Carolyn. It's good to have you. Would you 0:01:11.840 --> 0:01:13.880 like to, like just take a long nap and wake 0:01:13.959 --> 0:01:15.880 up and I don't know, twenty twenty six or twenty 0:01:15.880 --> 0:01:18.640 twenty seven, tell us about your world right now and 0:01:18.680 --> 0:01:21.480 what you're seeing, because you you tended to be pretty optimistic. 0:01:22.400 --> 0:01:24.280 Yeah, it's interesting. You know, if you go back a 0:01:24.319 --> 0:01:26.640 couple of months the Liberation Day and you took a 0:01:26.720 --> 0:01:29.199 nap on that day and woke up today, you'd say, well, 0:01:29.240 --> 0:01:31.200 I don't know, things don't look too bad. Other than 0:01:31.200 --> 0:01:35.080 what's going on overseas, the market is pretty much rebounded 0:01:35.280 --> 0:01:39.040 or recovered most of the ground. You know, people feel 0:01:39.040 --> 0:01:42.000 the economy is on more sturdy ground today than they 0:01:42.080 --> 0:01:46.120 thought in those weeks after, you know, after that news. 0:01:46.440 --> 0:01:50.240 But the economy still is quite robust in the markets 0:01:50.240 --> 0:01:52.520 that we serve, as you know. Connect one is in 0:01:52.600 --> 0:01:54.840 the New York metro market in New Jersey, New York 0:01:54.920 --> 0:01:58.520 now Long Island in a pretty big way, and the 0:02:00.120 --> 0:02:02.800 majority over the client base that we have is still 0:02:03.240 --> 0:02:06.360 seeing strong demand for products and services. A lot of 0:02:06.400 --> 0:02:09.840 service oriented businesses. There's still an enormous amount of demand 0:02:10.400 --> 0:02:15.360 for housing, for apartments, for all types of construction, warehousing, 0:02:16.360 --> 0:02:19.680 even office which has, as you know, been you know, 0:02:19.760 --> 0:02:23.880 the subject of you know, a lot of conversation over 0:02:23.880 --> 0:02:27.560 the last two or three years or so, has is 0:02:27.600 --> 0:02:31.359 seeing a tremendous rebound as we're moving, you know, through 0:02:31.400 --> 0:02:32.160 this period of time. 0:02:32.240 --> 0:02:35.400 I'm getting to a few questions from loyal listener Ryan 0:02:35.440 --> 0:02:40.079 Horan reaching out over the instant Bloomberg. He's glad we're 0:02:40.080 --> 0:02:42.160 talking to you because a great check of small business 0:02:42.200 --> 0:02:45.840 and the consumer. He's curious about any worrying trends or 0:02:45.840 --> 0:02:49.120 any pullback in underwriting that you're seeing. Are you adding 0:02:49.160 --> 0:02:51.400 to reserves to shield any non performing loans? 0:02:52.800 --> 0:02:55.400 You know, most banks are reporting that they're seeing a 0:02:55.440 --> 0:02:59.120 fairly benign credit perspective out there. I know there was 0:02:59.160 --> 0:03:02.320 a lot of terror of talk UH sixty days or 0:03:02.320 --> 0:03:05.359 so ago, and a lot of investors were very concerned 0:03:05.400 --> 0:03:09.920 about how tariffs may impact bank earnings, you know, through 0:03:09.960 --> 0:03:12.200 the through the credit cycle, through any sort of credit 0:03:12.200 --> 0:03:16.400 cycle that's really quite diminished these you know, recently in 0:03:16.400 --> 0:03:19.200 the in the past few days or weeks, UH and 0:03:19.480 --> 0:03:24.200 banks are still reporting a fairly benign credit period. There 0:03:24.240 --> 0:03:26.919 are certainly one offs, as we would always expect there 0:03:26.919 --> 0:03:30.280 to be, and there's appropriate reserving going on at most banks, 0:03:30.680 --> 0:03:34.520 but there's nothing systematic that's out there that were where 0:03:34.560 --> 0:03:37.080 banks are feeling that there are particular segments of the 0:03:37.120 --> 0:03:41.320 market that are showing more signs of weakness than than normal. 0:03:41.520 --> 0:03:42.080 Why is that. 0:03:44.240 --> 0:03:49.120 Negative? When we start, I always start with we have 0:03:49.160 --> 0:03:53.640 a four percent unemployment rate. Everyone has a job and 0:03:53.680 --> 0:03:56.280 anyone who's looking for a job can get a job, 0:03:56.760 --> 0:04:00.800 and so things are good. People are getting raised, there's, 0:04:01.680 --> 0:04:05.960 you know, plenty of opportunity in the market. There's been 0:04:06.000 --> 0:04:09.640 an enormous amount of liquidity put in the market over 0:04:09.680 --> 0:04:13.720 the last dozen years or so. That is just driving 0:04:13.960 --> 0:04:17.440 our economy to all time highs. The market is reacting 0:04:17.520 --> 0:04:20.960 to that. You can't buy a car, you get people 0:04:21.040 --> 0:04:24.920 are waiting in line for homes and apartments. Luxury goods 0:04:24.960 --> 0:04:28.719 are on fire. You go to the airport, you can't 0:04:28.720 --> 0:04:32.000 get on a plane. It's the economy. I keep saying 0:04:32.040 --> 0:04:35.120 the economy is robust, and everyone keeps challenging me why 0:04:35.160 --> 0:04:38.760 I use that word. Well, it just is. And so 0:04:39.279 --> 0:04:42.080 all of these things are driving GDP is growing it 0:04:42.240 --> 0:04:45.640 over three three and a half percent. That's what's driving 0:04:45.720 --> 0:04:49.080 what's going on, notwithstanding all the news that you're hearing about, 0:04:49.120 --> 0:04:52.000 you know a lot of global issues and other you 0:04:52.040 --> 0:04:56.120 know political you know craziness that's going on in the marketplace. 0:04:56.160 --> 0:04:57.520 But what do you make you know, we talked the 0:04:57.520 --> 0:05:01.520 retail sector earlier with Dana Tel and we talked about 0:05:01.880 --> 0:05:06.599 everyone trading down. So you're seeing discount retail doing better 0:05:06.680 --> 0:05:13.480 than most airlines pulling guidance it. It feels like there's 0:05:13.520 --> 0:05:17.200 stuff brewing. And I think it's safe to say that 0:05:17.320 --> 0:05:23.000 employers are really gun shy about letting go of workers. 0:05:23.040 --> 0:05:25.560 There is some labor hoarding going on because they remember 0:05:25.800 --> 0:05:28.520 all too well, Frank, what happened after COVID and nobody 0:05:28.520 --> 0:05:31.320 could find workers, right. So I just you know, I 0:05:31.440 --> 0:05:34.400 just wonder if you've seen a lot of economies. I 0:05:34.400 --> 0:05:36.400 know I ask you this all the time, but I 0:05:36.480 --> 0:05:40.400 just do wonder. Are you hearing anything anecdotally where people 0:05:40.440 --> 0:05:43.280 are like, we're a little nervous, and you know these 0:05:43.320 --> 0:05:45.400 tariffs are yeah. 0:05:45.600 --> 0:05:49.719 Yeah, I think we are seeing consumers being a bit 0:05:49.880 --> 0:05:52.960 more price sensitive, and I think they are, you know, 0:05:53.000 --> 0:05:56.440 maybe not spending as lavishly as they might have in 0:05:56.480 --> 0:05:58.800 the past, and they got a little shook up with 0:05:58.920 --> 0:06:02.640 the tariffs, and they're looking at some specific products that 0:06:02.920 --> 0:06:05.680 you know, may have changed in price. There's been some 0:06:05.839 --> 0:06:09.279 hoarding going on that I do think impacted some of 0:06:09.320 --> 0:06:12.960 that consumer spending. I know for a fact that's impacted 0:06:13.120 --> 0:06:16.360 you know, building supplies and building goods. You know, people 0:06:16.520 --> 0:06:20.440 front loaded buying things and anticipation of the tariffs, so 0:06:20.520 --> 0:06:23.960 there's a lot of turbulence going on in the marketplace today. 0:06:24.600 --> 0:06:28.440 My read, however, is though if you strip out you know, 0:06:29.360 --> 0:06:34.640 some of the you know, gas and teraf related items 0:06:34.680 --> 0:06:38.280 out of the consumer spending, you'll actually see numbers were 0:06:38.320 --> 0:06:41.960 actually up a bit, not down. And even what they're 0:06:42.000 --> 0:06:44.640 reporting that that you know, the consumer spending was down 0:06:44.680 --> 0:06:48.480 a bit, it's down less than one percent or something percent, 0:06:48.600 --> 0:06:51.920 So it's not a it's not a seat change that's 0:06:51.960 --> 0:06:55.640 going on. There is you know, some volatility here, but overall, 0:06:56.120 --> 0:06:59.599 I still see I don't I do not see a recession, 0:06:59.640 --> 0:07:02.760 and I still see a fairly robust economy ahead. 0:07:03.880 --> 0:07:08.960 You know, we're talking to you on Tuesday, June seventeenth, 0:07:09.000 --> 0:07:11.600 the day before we hear from FED chair J. Powell. 0:07:11.920 --> 0:07:13.640 We don't know what he's going to say. I think 0:07:13.640 --> 0:07:15.040 I know what he's going to say to some question 0:07:15.360 --> 0:07:17.880 when he answered some questions specifically about politics and his 0:07:17.880 --> 0:07:20.160 own future, because he said those same answers for months. 0:07:21.080 --> 0:07:23.520 But Frank, I'm curious what you see of the as 0:07:23.560 --> 0:07:26.280 the path of the Federal reserve for the remainder of 0:07:26.400 --> 0:07:28.440 the year. Give us your dot plot. 0:07:29.200 --> 0:07:31.520 Well, based on what I just said to you. If that, 0:07:31.760 --> 0:07:35.200 if that in fact is what's going on in the economy, 0:07:35.840 --> 0:07:38.440 then the expectation has to be that the Fed does 0:07:38.480 --> 0:07:41.840 not lower rates because the economy is still quite strong, 0:07:42.440 --> 0:07:46.520 and so my belief would be that you'll see a 0:07:47.600 --> 0:07:51.560 You will definitely see some commentary about the uncertainty that 0:07:51.960 --> 0:07:54.400 lies in the marketplace as we move forward. There are 0:07:54.440 --> 0:07:57.280 lots of things to be uncertain about, you know, tariffs 0:07:57.320 --> 0:08:00.720 being won, the war in the Middle East, the war 0:08:00.800 --> 0:08:03.280 in Ukraine, and how those things are impacting you know, 0:08:03.360 --> 0:08:07.400 gasoline prices, which happen to be down, but you know 0:08:07.520 --> 0:08:10.960 could rise dramatically depending on where things go. So there's 0:08:11.000 --> 0:08:13.360 going to be a lot of things that are inputs 0:08:13.360 --> 0:08:16.080 that the FED will be looking at that will determine 0:08:16.480 --> 0:08:18.600 what's going to happen in the future, and they may 0:08:18.640 --> 0:08:22.040 give some guidance about what they think those things would 0:08:22.040 --> 0:08:25.880 be going forward. The market expects the FED to cut 0:08:25.960 --> 0:08:29.720 at least one, if not two, times this year. I 0:08:29.760 --> 0:08:32.840 believe it'll be closer to one. And be careful what 0:08:32.920 --> 0:08:37.000 you wish for. I do believe that again, this economy 0:08:37.040 --> 0:08:39.600 will continue to roll on and the FED is going 0:08:39.640 --> 0:08:42.160 to have a tough time to lower interest rates as 0:08:42.200 --> 0:08:43.200 we move through this cycle. 0:08:43.320 --> 0:08:45.200 Frank, I do wonder too. You know, this was an 0:08:45.200 --> 0:08:48.120 interesting past earning cycle where we actually did have folks 0:08:48.120 --> 0:08:51.320 give you two scenarios like, if everything's good, here's what 0:08:51.360 --> 0:08:54.320 our numbers will be. If they're not, here's you know 0:08:54.320 --> 0:08:56.200 where they will be, and quite arrange. And I'm not 0:08:56.200 --> 0:08:58.240 saying everybody did that, but it was just for those 0:08:58.280 --> 0:09:01.520 of us who have covered publicly held companies for a 0:09:01.559 --> 0:09:04.520 long time and earn the earning season. I don't remember 0:09:04.559 --> 0:09:08.480 people doing that. I've seen people pulling guidance a lot, 0:09:08.559 --> 0:09:12.920 but not giving scenarios. Do how many I'm curious about 0:09:12.920 --> 0:09:14.400 the conversation do you have with your team. Do you 0:09:14.440 --> 0:09:17.719 talk about a lot of different scenarios in this environment, 0:09:17.920 --> 0:09:20.120 because it could go a lot of different ways, or no, 0:09:20.320 --> 0:09:23.080 you feel much more confident to say this is probably 0:09:23.120 --> 0:09:25.360 the course, and here's why we can make decisions based 0:09:25.400 --> 0:09:26.000 on this course. 0:09:26.960 --> 0:09:31.720 We definitely have those discussions. We're definitely keeping our ear 0:09:31.920 --> 0:09:36.079 close to what's happening. And the thing that I constantly 0:09:36.160 --> 0:09:39.360 bring back to the table is, let's listen to what 0:09:39.480 --> 0:09:43.160 our clients are telling us. And so, you know, it's 0:09:43.160 --> 0:09:44.839 one thing for us to predict what we think is 0:09:44.880 --> 0:09:48.000 going to happen based on facts, figures, whatever, but hearing 0:09:48.160 --> 0:09:51.840 in from our clients and what they're experiencing in each 0:09:51.880 --> 0:09:54.280 of the various segments that we do business with, to me, 0:09:54.920 --> 0:09:58.000 is much more important than any few we may have 0:09:59.040 --> 0:10:03.839 on our own. So we're still hearing that folks in 0:10:03.960 --> 0:10:08.680 general are in good shape. There's a fair amount of 0:10:08.679 --> 0:10:13.319 liquidity still in you know, folks checking accounts and their 0:10:13.360 --> 0:10:18.439 ability to borrow still remains strong. And so we continue 0:10:18.480 --> 0:10:22.480 to see a fairly robust economy going forward. And that's 0:10:22.520 --> 0:10:26.080 what we're modeling for and that's what we're predicting for 0:10:26.120 --> 0:10:26.600 the future. 0:10:26.679 --> 0:10:29.880 Some people say uncertainty. Frank's word is robust. That's the 0:10:29.920 --> 0:10:31.959 word he is over and over again. 0:10:32.240 --> 0:10:34.520 You're existent you've been consistent. 0:10:34.280 --> 0:10:39.040 And uncertainty is is a challenge though, and it is 0:10:39.240 --> 0:10:44.240 impacting you know, people's decision making ability. And so you know, 0:10:44.320 --> 0:10:46.079 one of the things that I always look at and 0:10:46.120 --> 0:10:48.720 always counsel people is, hey, look at what's really going 0:10:48.720 --> 0:10:51.240 on on the ground, and you know, try not to 0:10:51.280 --> 0:10:53.960 get caught up in all the headlines of you know, 0:10:54.000 --> 0:10:56.280 what may be going on around you that don't that 0:10:56.320 --> 0:10:59.640 doesn't necessarily impact you. I've had conversations with clients we're 0:10:59.679 --> 0:11:02.120 talking to me about tariffs, and tariffs don't actually impact 0:11:02.120 --> 0:11:04.679 their business, right, So right, I'm saying, well, okay, why 0:11:04.679 --> 0:11:09.280 are we focused on that? So uncertainty absolutely can change 0:11:09.559 --> 0:11:11.079 the direction of the economy. 0:11:11.240 --> 0:11:13.880 Yep, sentiment can be pretty strong, right, and uncertainty certainly 0:11:13.880 --> 0:11:17.160 plays into something like that. Hey, Frank, as always, thank you, 0:11:17.200 --> 0:11:20.920 Thank you. Frank Sorrentino, chairman CEO at the publicly held 0:11:20.920 --> 0:11:23.640 In Jersey based community bank connect One Bank, or as 0:11:23.679 --> 0:11:25.280 we said, and like to remind you it is a 0:11:25.360 --> 0:11:27.000 parent company of connect One Bank.